Correlation Between Permian Resources and Texas Pacific
Can any of the company-specific risk be diversified away by investing in both Permian Resources and Texas Pacific at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Permian Resources and Texas Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Resources and Texas Pacific Land, you can compare the effects of market volatilities on Permian Resources and Texas Pacific and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Permian Resources with a short position of Texas Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and Texas Pacific.
Diversification Opportunities for Permian Resources and Texas Pacific
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Permian and Texas is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Texas Pacific Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Pacific Land and Permian Resources is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Permian Resources are associated (or correlated) with Texas Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Pacific Land has no effect on the direction of Permian Resources i.e., Permian Resources and Texas Pacific go up and down completely randomly.
Pair Corralation between Permian Resources and Texas Pacific
Allowing for the 90-day total investment horizon Permian Resources is expected to generate 4.13 times less return on investment than Texas Pacific. But when comparing it to its historical volatility, Permian Resources is 1.47 times less risky than Texas Pacific. It trades about 0.06 of its potential returns per unit of risk. Texas Pacific Land is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 56,835 in Texas Pacific Land on August 27, 2024 and sell it today you would earn a total of 116,165 from holding Texas Pacific Land or generate 204.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Resources vs. Texas Pacific Land
Performance |
| Timeline |
| Permian Resources |
| Texas Pacific Land |
Permian Resources and Texas Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Resources and Texas Pacific
The main advantage of trading using opposite Permian Resources and Texas Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources position performs unexpectedly, Texas Pacific can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Texas Pacific will offset losses from the drop in Texas Pacific's long position.| Permian Resources vs. Devon Energy | Permian Resources vs. EOG Resources | Permian Resources vs. Coterra Energy | Permian Resources vs. Range Resources Corp |
| Texas Pacific vs. Devon Energy | Texas Pacific vs. ConocoPhillips | Texas Pacific vs. Occidental Petroleum | Texas Pacific vs. Permian Resources |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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